Business & Investments

Business Monitor identify a lack of anticipated growth in Russia’s infrastructure sector

(PRWEB UK) 12 February 2014

Business Monitor has just released its latest findings on Russia’s infrastructure sector in its newly-published Russia Infrastructure Report.

Business Monitor has considerably revised down their construction industry forecast for Russia in 2014 in light of recently published lacklustre official data. With a contraction of 1.25% in the first nine months of 2013, they now forecast only moderate growth in the industry of 1.5% for 2014. Although they had anticipated significant growth in the industry as a result of the large investments made for the Winter Olympic Games, this seems to have failed to materialise. In addition, private investment has continued to weaken as a result of endemic corruption, inefficient bureaucracy and lack of investor guarantees. This poor business environment is exacerbated by stubbornly high inflation and slow economic growth.

Key developments in the sector covered by the Report:

■ Business Monitor’s Country Risk team forecasts a slowdown in the Russian GDP, which should arrive at 2.0% in 2013, down from 3.4% in 2012, with a slight acceleration to 2.5% expected in 2014.

■ Infrastructure associated with the export of commodities (pipelines, ports and transport infrastructure – to support oil and gas output east and west of the Urals) has a high growth potential – as development is predicated on growth in the natural resources sector. These projects have been prioritised by the government.

■ In November 2013, Avtodor shortlisted four teams to bid for the M-11 highway. The four teams are Corsan-Corviam Construccion and consortia Stolichniy Tract OJSC, Roads Construction Corporation and Two Capitals Highway. The concession agreement involves financing, constructing and operating the 543km-684km section of the toll road.

■ In January 2014 Lithuania-based company Avia Solutions Group and Russia’s state-owned company Rostec signed a cooperation agreement to develop and management a new Moscow airport with a capacity of 12mn passengers per year. The new Russian airport, dubbed Ramenskoye International Airport, is designed to cater for low-cost airlines – a niche industry that has experienced slow growth in Russia as a result of insufficient infrastructure.

■ Business Monitor have recently seen significant developments in the residential/non residential sector, including the announcement of a US$ 15.4bn government budget aimed at developing and modernising St Petersburg’s residential buildings. This project – announced in August 2013, will see the development of 900ha of land in 22 different sites around St Petersburg.

■ Business Monitor maintain their view that political risk is the main element that can ultimately curtail growth as public policy remains opaque, convoluted and subject to frequent change. The planned privatisation scheme remains on the agenda; yet, on the back of heavy state involvement and strong vested interests, they believe foreign enthusiasm to be muted.

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